“I Have Big Dreams … and Small Savings. Help!”

There are countless lazy articles on the Internet about how to save more money, 99.9% of which are detached from reality.

This is not one of those.
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Everyday I get emails from readers that say things like:

“I want to travel / quit my job/ retire in 10 years. But I don’t have the savings.”

“I have big dreams … and big debts.”

“There’s no way I could save more. I’m barely treading water.”

Does this sound familiar?

If so, how would you feel with a giant cash cushion at your disposal?

Imagine that you have an extra $10,000 floating around. You can crush your debts. You can invest. You can take your family on a month-long trip to Argentina. You can sleep more peacefully at night.

A magical genie isn’t going to bequeath you with $10,000. And guess what? That’s okay. You can be your own genie. You can build these savings in tiny steps, in increments of $10 or $100 or $1,000.

The best part of all? Anyone can do it.
This is where The One Percent Challenge kicks in. I’m challenging readers to boost their savings rate by one percent each month.

Why? Because anyonecan find an extra one percent. And even though you’ll never miss that money, it triggers a powerful change in your life.

To calculate one percent of your income, figure out what you earn monthly. Then move the decimal point two spaces left.

If you earn $2,000 per month, one percent is $20.

If you earn $4,000 per month, one percent is $40.

If you earn $6,000 per month, one percent is $60.

Boost your savings by this amount during the first month. Then continue boosting your savings by one additional percent each subsequent month. After a year, you’ll be saving 12 percent more than you were a year ago.

When I say “save,” I’m referring to any action that boosts your net worth, including:

Crushing your debts (paying more than the minimum).

Investing in real estate, retirement accounts, or launching a business.

Literal savings in the bank.

This money can wipe out your student loans. It can put a huge dent in your mortgage balance. It can build investments. It can buy you a $5,894 jar of caviar. (Yeah … I get a kick out of surfing Amazon with the “price high to low” function.)

This Challenge is a bit like losing one pound per month. At first, it feels like nothing. One pound? Who cares?

But after a year, you’ve lost 12 pounds — and that feels awesome.

I invited Challengers to share their tips, advice, questions, struggles and more on the One Percent Challenge Facebook page. Here’s a snapshot into the scene:

What’s Your Savings Personality?

The first thing I noticed is that Challengers tend to save in one of two ways:

The Anti-Budgeter. Some readers open another account and hide money from themselves. Once that money is ‘out of sight, out of mind,’ they’ll naturally readjust their lifestyle. They don’t have a specific plan. They just pull savings from the top, and live on the rest. This strategy is part-intuition, part-leap of faith — and it always seems to work.

The Pinpointer. Other readers pinpoint specifically where they’ll pull savings from. Found a cheaper grocery store? That’s an extra $10 per week in the savings account. Switched to a cheaper cell phone plan? That’s another $20 per month.

Most people practice a blend of both, but tend to lean in one direction. Intuition or numbers? Conceptual or details?

Try the Anti-Budget

Boom! That’s it. There’s no reason to line-itemize the amount you spend on toothpaste vs. coffee. Just pick a savings goal, hide this money from yourself, and continue living your life.

“But I seriously can’t save anything!”

Start with just one percent of your income. That’s $10 for every $1,000 you earn.

The idea that your income is precisely the same as your expenses is a mental block, a limiting belief. (You bring home $4,241 per month and your expenses are $4,241 per month? Really??)

If you’re suffering from this limiting belief, your mind might not be in mood for pinpointing savings. Fine, fair enough.

Just take a leap of faith and hide one percent of your income from yourself. Then see what happens.

Slow and Steady … or Fits and Starts

Some Challengers literally save one percent each month, while others save in leaps and bounds — such as 3 percent one month, but only a fraction of a percent the next month.

Both strategies are fine. The overall trajectory matters most — and in both cases, that trend is positive.

Back to the weight-loss analogy: you may not lose precisely 1 pound each month. You might lose 2 pounds in July, when you’re running and swimming more. But then you’ll gain 1 pound in December during the holidays. No big deal — the trend matters more than any isolated data point.

Here are two reasons saving can be sporadic:

One-Time Costs. You might get hit with one-time or annual expenses. You move to a different state. You travel more during the summer. Your refrigerator stops running (hehe, cue the joke). Savings drops for a month, but then it’s back on-track.

Saving in Chunks. This highlights the difference between The Anti-Budgeter vs. The Pinpointer. If you’re pinpointing precisely where your savings come from, you’ll find these in odd chunks. Switching insurance plans? That saved 2.49 percent of your monthly income. Moving to a cheaper apartment? That saved 8.32 percent. Life doesn’t happen in neat little round numbers, and that’s okay. In fact, that’s awesome.

Dude, Where’s My $814.61?

In my younger, scrappier days, I budgeted in excruciating detail — not because it was natural, but because it was necessary. Money was so tight, I needed to pinpoint.

One of my friends introduced me to Digit, which turned out to be the perfect platform for my casual money-management style. It’s a free service that scans your spending habits and automatically tucks away tiny amounts of money into “invisible” savings. Out of sight, out of mind.

I joined on a whim a few months ago, and soon I received this text:

Which is pretty freakin’ cool — much better than those stodgy, boring finance apps.

The funny part (beyond the obvious) was that I didn’t notice the missing $250. It came from my account in tiny increments — $7 here, $11 there — and I never felt the pinch.

I ignored my Digit balance for a long time, checked it today, and saw this:

Holy mackerel! Really? I didn’t even notice this was gone.

Here’s what’s funny about this:

My significant other Will and I live on one income and invest the other. It’s a quick-and-easy way to save half of our income: live on the lower paycheck; save the higher half.

How does this work? Logistically, it’s simple: We get paid in separate checking accounts. Everything in one account is tapped for bills and travel. Everything in the other account is saved for real estate investments and retirement contributions.

Why should you care? Because Digit pulls from our “spending” account. This is money we meant to spend. And I’m sure we would have done so, had it not seeped away in $4 and $9 and $14 increments.

So …. yeah. Big fan of these guys. I recommend checking out Digit if you have a relaxed budgeting style. (It’s free. No minimums, no fees, and they guarantee against overdraft charges. If you use that link, I’ll get $5 for the referral — and of course, it’s always free for you.)

Recurring Savings > Willpower

Willpower is weak. Relying on sheer willpower to prevent overspending is ineffective, unreliable, and just plain sucks.

The better way to save money is by automating it into your daily life.

Yes, you should automatically pull money from each paycheck. But don’t stop there. Accelerate your automation by creating recurring savings.

Recurring savings are more powerful than one-time feats.

One-Time: If you’re eating a Chipotle burrito and you order tap water instead of a $2 Coke … sorry, but that’s bulls**t savings. You’re spinning your wheels. A one-time savings of $2 won’t move the needle. It won’t nudge your net worth, grow your investments or help you escape the rat race. (Plus, you’ll probably spend that $2 somewhere else. It’s not ‘savings’ until you save it.)

Recurring: If you lower your electricity bill by $20 per month AND funnel this into an account that’s earmarked for savings/investments, congratulations. You’ve actually moved the needle.

Build recurring savings of $20 and $200 and $2,000 into your life. This changes your life in ways that skipping a $2 Coke never could.

In fact, here’s a bonus challenge: Build one recurring habit into your life each month. After a year, you’ll have a dozen great habits on auto-pilot.

Here are three easy, recurring ways to save more than $1,000 per year:

Compare Insurance Plans. One afternoon per year, compare quotes on auto/health/home/life insurance policies. Let’s say you find comparable coverage that’s $30 per month less. Boom. That’s $360 a year. You can enjoy a lot of tacos and beer for that money.

Downgrade Cell Phone Plans. Let’s say you switch to a plan that’s $25 per month less. Voila — another $300 per year for less than one hour of work. Nice hourly rate.

Invest in Efficiency. One Challenger switched her old lightbulbs to energy-efficient LEDs. She now saves $365 per year on her electricity bill. Time commitment? Minimal. Payback period? Quick. And her savings will continue recurring for years.

Find Your Trigger

What happens immediately before you decide to spend money? What’s the trigger?

Here’s an example from my own life:

I used to spend a lot (more) money dining at restaurants. I tried to willpower myself to stop, but that attempt fell flat on its face.

So I began paying attention to triggers. After all, there are dozens of reasons why a person might go out to eat: convenience, taste, quality, ambiance, nostalgia, socialization. Which of these factors was triggering my drive?

I became conscious about my internal decision-making. I began paying attention to behavioral triggers.

I realized that throughout most of the day, I have no desire to head out to a restaurant. But by 5 pm or 6 pm, I’m antsy to leave the house. I’m typically home all day, usually wearing yoga pants and a messy ponytail. Hitting a restaurant incentivizes me to — you know — take a shower and get dressed. It gets me out of the house and puts me in the company of other human beings.

In other words, I don’t want a $14 cheeseburger (even though that’s what I’m buying); I want to feel like a functioning member of society.

Once I realized that, I began finding other ways to fill this same need: spend the afternoon in a coffeeshop, join a gym, find a yoga studio (hey, I’m already wearing the right pants.)

The Internet is filled with countless lazy one-size-fits-all listicles on how to save money: skip lattes! Exercise at home! But these don’t honor the deep-seated triggers that drive our spending decisions.

The better way to reduce spending (or, more accurately, to redirect spending in accordance with your priorities and values) is to pay attention to triggers. Once you know why you spend, you’ll know how to find a satisfying alternative.

Comments

Talk about a dose of reality…this article is definitely that. I agree that most of us PF Bloggers tend to over look the emotional side of being in debt. Saving is a discipline and you have to really want it to make it happen. I have heard a lot about the system Digit, but never took the time to research it. I am now intrigued.

1.. I keep one credit union account locally for bill paying, etc. and a second one about 1000 miles away in Michigan where I transfer 10% from each paycheck into an account paying 3% APY. Lot harder to access that money if it isn’t available right across town!

2. I take all my silver change each day and put it in coin rolls. I’m a lot less likely to break open a roll of coins to spend than I am to spend change in my pocket.

I’m definitely an anti-budgeter…that saving concept is working for me. Digit may accelerate the process!

I’ve heard of Digit a few times but now I’m very intrigued! We also live off one income (my husband’s) and save all of mine. I’d be interested to try Digit and have it pull from his account 🙂 Wonder if he’d even notice haha!

Also – I agree with finding the triggers that make you want to spend money. I’m exactly like you – come 5 pm my husband is home from work and our little girls are pretty wild. We love going somewhere in the evening. It’s not about craving a meal out, it’s about getting out of the house!! If the weather is nice, we go to a park. If it’s not, we go for a drive or swing by the grocery store.

I learned the anti-budgeter approach years ago in my teens from a good friend. He used to carry only enough money in his pocket that he was willing to spend. He always saved the rest.

Fast forward many years, I really was able to start saving aggressively when I made it my first priority. That means savings is the first budget item to come off the top – automatically if possible.

Later in life as I became more frugal I also adopted the savings challenger approach. I evaluated every expense in order to squeeze any unnecessary costs out – so I can save and invest the differences.

I certainly recognize triggers in my spending habits. Have you noticed your approach changing over time?

I like this idea – I believe there are a lot of people out there who think they have to save a certain percentage of their paycheck, and then when they decide that they can’t reach that percentage, they abandon the idea of saving altogether. So then they figure, what’s the use, and save 0.

Saving 1% to start with is a great method, because it gets the ball rolling and creates positive momentum for people. Great read!

Exactly, Joe! Saving a large percentage can feel intimidating … but the path is one percent at a time. One tiny step at a time. If next month, you’re saving (or earning) just a little more than you were this month, that’s a win! It’s a step in the right direction, and every marathon is nothing but a series of steps.

I follow a mindset of “passive expense optimization,” which is just like passive income creation, but turned on its head. Take one action today, reap perpetual benefits; it’s takes the active decision making out of the equation.

The focus on small steps approach I think is a good way to attack any long term, formidable goal like saving a bundle for retirement. Saving a million might feel so challenging that we throw up our hands in resignation and save little. But saving $100 a month feels a lot more do-able. The strategy we’ve been lucky enough to use is to keep our expenses low enough that one of our salaries covers them, then save 100% of the other salary.

Big dreams and small savings. Ain’t that always the way. I think automating things really is the way to go for anyone having trouble saving money. As you say, it’s only a mental block that you NEED to spend exactly as much money as you make in a given month.

You are now the second financial blogger I read that has mentioned digit. I might have to give them a try one of these days.

What I have done lately is that I would have my employer (yes I am working right now lol) automatically deposit 10% into my investment account and the 90% will be placed in my checking. I don’t have to worry about this 10% and besides I like how at times I get a dividend later.

I am always interested in a good article on savings. I like the break down here on two styles of savings. Digit is an interesting find and I intend to check it out. As a real estate investor I have to say that I think one important way to save is examining your mortgage. The author recommended spending time each year evaluating if you can save money on things like your auto insurance or your phone plan. It is also worthwhile to examine if you can save money by refinancing your home or even selling your home and investing in a different property. That property can be less expensive or perhaps financed with a more favorable home loan.

Great Article, I started using Digit a few months ago and just as you said you never really miss anything that it takes. The ideas for saving you have are great I actually opened another screen for my savings account and set up an additional 2% of my income to come out every paycheck (on top of my already 13%) though I did start out doing this a while ago and have built up now to 13% i feel that number should be closer to 30% to 50% and I’m sure if i keep this up i’ll be there soon enough.

Thank you for a great article, Paula!
I began saving “on purpose” about three years ago; later in life but better late than never. The action step began after reading one of Robert Kiyosaki’s books where he writes about saving money in three jars.
Without going into detail the message which really stuck was it doesn’t matter how much but it’s about the person I become in the process.
I opened a new bank account at a totally different bank from my regular bill paying and spending account. In the beginning I would literally deposit $10.00 a month, sometimes up to $20.00. However, what began to happen was a shift in mental momentum. It became exciting, and a fun challenge, to see the account grow over time and to actually have an emergency fund if I needed it.
Last year I paid off a vehicle loan 7 months ahead of schedule and I’ve learned I can maintain a similar lifestyle even with putting money away. While it may not be every month I have work (it’s seasonal) I socked away $500.00 today from my last paycheck. That’s a great feeling even when it get’s a little scarce before the next pay cheque!
Also, because I charge GST on part time self employment income I set up a GST account at the same new bank. I deposit into my regular business account, withdraw the GST and deposit into the GST only account. I love how this works as I know I will always have what I owe in GST, before adjustments. That was the best move I ever made for not spending the GST money, and having to look for it elsewhere, when necessary! Been there, done that!

I love automation because once I decide on something – that good decision just keeps happening and happening without me having to think about it. I love technology. I’d rather use it that my willpower whenever possible. Technology doesn’t let emotions come into play… it just works… over and over again. I automate everything I can (unless I deem the automation costs too high).

I am a meticulous budgeter. I pretty much know where every dollar goes. And although I do enjoy this (or I couldn’t maintain it), it can be a lot of work and it can be easy to get behind if I get busy. I really like the idea of Digit…and who wouldn’t like an app that sends pics of Diddy making it rain??!! That’s amazing 🙂

Paula, I fell so challenged by the ‘One Percent Challenge’, i think i should recommend it to my husband too. The three ways you have listed about how challengers save money are also worth a try for anyone.

Looking just at savings misses the whole picture for me. I currently save zero dollars / month (besides retirement that comes directly from my paycheck). But I have a substantial emergency fund already AND I only live off 1/2 my income. The other 1/2 of my take home pay goes to student loans. Aside from an emergency fund, getting out of debt is number one to me.

Hello Paula-
I want to thank you for your amazing, content-rich emails. I am always thrilled to see you in my inbox. I savor your words and advice like I would a good magazine. Thank you for doing what you do. I close out of your blog feeling inspired. Just signed up for Digit. Waiting for my account to be verified. Can’t wait to start saving…painlessly! Best, Kristen

I strongly agree with you. This mental block of thinking that my income is just same as my expenses, is now a thing of the past after reading this post. In fact, I am going to use the one present strategy, starting this month. This is just great!

Really an helpful article. Initially to have small savings. one must save at least 10 to 15 % of this pay check , rather than increasing the percentage he should pay it regularly month by month , most of the people starts it in a stretch and they stop it in near future , this really helps none.

To increase your savings percentage from the percentage you started , at least take an year , for e.g, if a person earns $2000 as monthly pay, he will get an increment of $1000 dollars minimum , so he can invest that particular pay in the savings so his savings percentage will grow to a middle minimum level .
To concentrate on his lavish expenses, week end parties etc.

Evaluating our triggers is a great way to start the process of changing how we spend our money. I started with small things and have worked up to the big ticket areas so that I can invest as much of my salary as possible. It truly doesn’t matter how much you make, it’s how much you keep/invest/grow. I’m building wealth with every pay check, not just getting by.

Great post and great blog! I just came across it today – very inspirational – and I can’t wait to read more articles. I like how you’re not over the top on budgeting like some of the other “early retirement” blogs. Keep up the good work and stay inspirational!

Great post and great blog, Paula. I just came across this yesterday and have been intrigued by your in depth articles. They are more detailed and useful than the run-of-the-mill save-all-you-can posts that I continue to come across. I like the focus on the income as opposed to strictly saving. Keep up the good work!

Great article! I have recently set a budget for myself and am trying to pay down debt at the same time. I think I’m going to use the strategy of: pay debt first, then pay self, and then relax with the rest. It should be interesting to see the results in a few months!

As a college student, I continuously look for savings strategies to build capital, cut down on debt, and still enjoy my undergraduate years. Articles encouraging me to “cut back on lattes” or “work out at home” fail to build true money managing skills. I’m happy to admite that the One-Percent challenge is gold. I’m excited to apply this strategy upon my return to campus.

This article was such a fantastic read! Thank you! I’ve been scouring personal finance blogs, as I am trying to get my financial life in order, and this post was the first I came across that mentioned identifying your triggers. So true! Sometime budgeting every cent can make me feel so restricted, and then I don’t want to stick to it. Realizing that I can identify *why* I want to spend the money is really a new notion for me. Thank you! You are inspiring.

Saving some money really became a drug for me! And this is awesome! I’m looking for every expense I don’t need, I renegociant all my insurance contracts, save full, avoid restaurants… All this in order to put this money into a down payment for my next investment.

At this point you need to realize what is your goal. Is that eating 3 times a week at restaurant or manage your portfolio real estate in 5 years? Both re not possible in my case. I made a choice.

What do you have to say for people living paycheck to paycheck? If every dollar goes to bare necessities and you’re cuboard is empty the day before payday how can one save any money? For earning, how about the people who have children to care for and every hour of time is spent working to stretch the paycheck as he/she can’t afford even the slightest hiccup in cash flow spending that time looking for more work?